P. 7
Specifically, the to ensure pre-establishment national treatment. It means
Foreign Investment that foreign investors will be treated at par with domestic
Law contains a number investors during the initial stages of setting up.
of provisions that
pledge to give foreign China’s Negative List is a comprehensive list of
investors a level restrictions on foreign investment determined by the
playing field with their State Council, China’s cabinet.
domestic counterparts.
The new law also contains measures (for example,
Further, it not only prohibits government officials Article 20) to guard foreign investments from arbitrary
from using administrative measures to pursue forced expropriation. Under special circumstances, however,
technology transfers (also Article 22), but also makes the law says that the State may expropriate or
them criminally liable if they do so (Article 39). requisition the investment of foreign investors for the
public interest.
Besides IP considerations, the law says that
foreign investors will receive equal treatment when In such an event, the law pledges that expropriations
applying for licenses (Article 30) and participating and requisitions will be done in accordance with legally
in government procurement (Article 16) – two prescribed procedures and offer “fair and reasonable
common complaints from the international business compensation”. Further, Article 35 states that some
community. According to Article 15, foreign investors investments could be subject to national security
will also be given equal opportunity to participate in reviews, and that decisions made for national security
the formulation of standards. reasons are final and cannot be appealed.

In terms of managing foreign investment, Article 4 of What is missing from the law?
the law says that the state should use the Negative List
Although the Foreign Investment Law is designed to
respond to oft-repeated complaints from the foreign
business community, it has been met with a tepid response.

Critics of the law say that it is too general to know
how it will work in practice. According to media
reports, some of the language was intentionally made
vague – or removed altogether – due to ongoing
disagreements among policymakers over how certain
issues should be treated.

Ines Liu, Assistant Manager, International Business
Advisory at Dezan Shira & Associates, said, “Overall, the
Chinese government tried to make a positive step for
foreign investors.”

Liu cautioned, however, that “since the law is drafted
in a very general way, it might take a long time until the
government releases the implementation rules.

The very critical step would be to see how the
Chinese government will steer new avenues to
strengthen legal enforcement.”

South China Business Journal 4
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